Market may recover on higher Asian stocks

The market may edge higher tracking gains in Asian stocks. US stocks closed higher on Thursday on better than expected weekly jobs data. Closer home, the food price inflation eased slightly in late December 2009, data released by the government during trading hours on Thursday, 7 January 2010, showed. The food price index rose 18.22% in the 12 months to 26 December 2009, lower than an annual rise of 19.83% in the previous week.

The Reserve Bank of India (RBI) has said interest rate policy cannot address inflation caused by supply problems, but has also said it is worried about a spillover to other prices. Senior government officials have said it is too early to raise interest rates. C. Rangarajan, the prime minister's economic adviser, said on Tuesday some liquidity tightening might be needed to moderate price expectations

Last week, RBI Deputy Governor Shyamala Gopinath said the focus of monetary policy was shifting to managing recovery and containing inflation from fostering growth after the global downturn. Some policymakers have said that food prices may drop in coming months and ease the pressure on the central bank to hike rates.

The December exports data should be "encouraging", Trade Minister Anand Sharma said on Thursday. India's exports rose an annual 18.2% in November 2009 to $13.2 billion, the first rise after 13 straight months of decline.

The Government may reportedly introduce a legislation in the budget session of Parliament to make necessary constitutional amendments and facilitate the launch of the Goods and Services Tax (GST) although the rollout of this comprehensive indirect tax reform from the scheduled date of 1 April 2010, seems unlikely.

Meanwhile, the government will reportedly allow companies to adjust the fringe benefit tax (FBT) paid by them against the advance tax due in the March 2010 quarter, reducing the hazard of claiming a refund and slightly improving profits at a time of rising costs.

Asian stocks rose on Friday after gains in US retail sales boosted confidence in the global economic recovery. The key benchmark indices in Hong Kong, Indonesia, Japan, Singapore and Taiwan rose by between 0.07% to 0.67%. But, the key benchmark indices in China and South Korea fell by between 0.35% to 0.85%.

South Korea's central bank on Friday kept its interest rate unchanged at a record-low 2% for an 11th month amid a growing conflict with a government opposed to early monetary tightening.

US stocks struggled on Thursday as the dollar rose and investors remained skittish ahead of the jobs report. The Dow Jones Industrial Average rose 33.18 points, or 0.3%, to 10,606.86. The S&P 500 index added 4.55 points, or 0.4%, to 1,141.69. The Nasdaq was down 1.04 points, or 0.1%, to 2,300.05.

In economic news, the labor department reported jobless claims last week rose by just 1,000 to 434,000, which is less than expected. Continuing claims came in at 4.80 million, lesser than expectations of 4.98 million.

Closer home, the key indices snapped four-day winning streak on profit booking in frontline stocks on Thursday, 7 January 2010. Weak global markets also dampened sentiment. The BSE 30-share Sensex fell 85.41 points or 0.48% to settle 17,615.72 on that day.

As per provisional figures on NSE, foreign funds bought shares worth Rs 92.21 crore and domestic funds sold shares worth Rs 127.41 crore on Thursday.